Finding 1172854 (2025-004)

Compliance Requirement: Other – Inaccurate reporting of the Schedule of Expenditures of Federal Awards Campus: Sacramento, Sonoma Cluster name/program: Supplemental Nutrition Assistance Program Cluster and Reserach and Development Programs Cluster Listing Numbers: 10.561, 47.076, and 84.411 Federal Agency: U.S. Department of Agriculture National Science Foundation U.S. Department of Education Passed through Entity: 10.561 - State of California Department of Social Services Federal Award Identification Numbers: 10.561: 21-3068 and 24-3069, 47.076: 1953472, and 84.411: S411B230042 Award Year: July 1, 2024 – June 30, 2025 Criteria: According to 2 CFR 200.502(a), the determination when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity related to the Federal award pertains to events that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: (1) Expenditure/expense transactions associated with grants, cooperative agreements, cost-reimbursement contracts under the FAR, compacts with Indian Tribes, and direct appropriations; (2) The disbursement of funds to subrecipients; Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws and regulations. Effective internal controls should include procedures to ensure federal expenditures are accurately and completely reported on the Schedule of Expenditures of Federal Awards (SEFA). Condition and Context: ALN 10.561: We noted the Sacramento campus incorrectly recorded $712,979 of subrecipient expenditures which were not disbursed during FY2025. This resulted in an overstatement of expenditures on the FY2025 SEFA which management adjusted the SEFA accordingly. ALN 10.561: During our testing of nonpayroll expenditures for the Sacramento campus, we noted $25,605 related to a period outside of FY2025. The total out of period expense including the indirect cost was $32,006. This resulted in an overstatement of expenditures on the SEFA for FY2025. ALN 84.411: During our testing of indirect cost for the Sonoma campus, we noted $29,495 of expenditures related to a period outside of FY2025 resulting from management correcting the indirect cost rate for a grant that began in the prior year and recording all of the adjustment in FY2025. This resulted in an overstatement of expenditures on the FY2025 SEFA. ALN 47.076: During our payroll testing for the Sonoma campus, we noted $13,980 of expenditures related to a period outside of FY2025. The total out of period expense including the indirect cost was $21,110. This results in an overstatement of FY2025 Schedule of Expenditures of Federal Awards (SEFA). Cause and Effect: While the University’s policy is to record subrecipient expenditures on the SEFA upon the disbursement of funds to recipients, the Sacramento campus’ SEFA preparation process did not adequately consider whether amounts recorded in the SEFA had been disbursed to the subrecipient. At the Sonoma campus, the error was the results of an indirect cost rate being utilized from a previous grant versus the updated rate in the new grant. There was also a lack of internal controls over the accruals of summer payroll impacting federal awards. Failure to establish effective internal controls regarding financial reporting for the preparation of the SEFA resulted in an overstatement of expenditures. Questioned Costs: Not applicable Statistical Sampling: Not applicable Repeat Finding: Yes for 10.561 and No for 47.076 and 84.411 Recommendation: We recommend the University implement a system of internal control that is designed and operating effectively to ensure the SEFA is complete and accurate. Views of Responsible Officials: The University concurs with the recommendation. The University will review and enhance its procedures and internal controls to ensure the SEFA is complete and accurate.